Robinhood reinvest dividends

Robinhood DRIP: Dividend Reinvestment in 2022


Robinhood dividend reinvestment fee and enrollment, commission, fractional shares. Robinhood DRIP plan for stocks, mutual funds, ETFs, and ADRs. Is it free?


Robinhood DRIP Plan


Dividend reinvestment, also known as DRIP, is a popular strategy among long-term investors. It allows a position to passively grow by automatically purchasing additional shares with dividend payouts. Robinhood users can use the included DRIP service to enhance their portfolios, as well.

Keep reading to see how dividend reinvestment works at Robinhood.


What is a Dividend Reinvestment Plan?


As mentioned, a Dividend Reinvestment Plan (DRIP) is a service offered by Robinhood to reinvest dividend payouts into the same security that created them. Essentially, DRIPs offer investors a way to take a ‘hands-off’ approach to growing long-term positions.

At Robinhood, it is possible to purchase whole shares or fractional shares with dividend payouts. That means, even when a dividend payout is less than the share price that you are investing in, your funds will still be used for reinvestment.


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Activate Dividend Reinvestment at Robinhood


To activate dividend reinvestment, there are few simple steps that you can follow. Here’s how to do it.

The first step is to navigate to the Settings menu. From the list of settings categories, you will see ‘Investing’. Once selected, you will click or tap on ‘Dividend Reinvestment’.

If DRIPs are off, you will see the toggle switch set to the ‘OFF’ position. To begin the process of turning it on, simply use the provided switch.


Robinhood Dividend Reinvestment


DRIP will not likely activate right away as there is some ‘paperwork’.

Robinhood presents you with some basic DRIPs-related information, and you should opt to continue.


Robinhood DRIP


You will then be asked to sign an agreement. While it is always recommended to read the agreements offered, you won’t be able to activate DRIPs without agreeing.


Robinhood drip program


As soon as you agree, you get the option once again to activate DRIPs.


Robinhood reinvest dividends


Why Use DRIPs?


There are several reasons that investors like to use the DRIP feature at Robinhood. Here are a few of the most popular reasons:


Increase holdings automatically

If you have a position open that you intend to hold for a significant amount of time, DRIPs help you add to that position over time, automatically. For long-term investors, DRIP can sometimes be used as a ‘set and forget’ strategy that needs little maintenance.


Earn more dividends

The more shares you own in a company that pays out dividends, the more dividends you can earn. By using DRIPs, you are increasing your holdings on a regular basis. A process that also leads to a greater dividend payout.


Lowering your average purchase price (Dollar Cost Averaging)

According to Robinhood’s help library, Dividend Reinvestment can be a form of dollar cost averaging. However, from our experience, the effect of the dividend would do little to bring down a cost average. While it may have some effect, it may not be significant enough to write home about.

Consider scheduling regular purchases of said stock if dollar cost averaging is your goal.


Who Benefits from DRIPs?


Investors of all kinds can benefit from DRIPs. However, it is important to keep the rate of growth in mind to reign in your expectations. Dividend payouts are relatively small when compared with the size of the position that generated them. So, to see significant growth resulting from DRIPs, time is needed.

With a solid long-term approach to DRIPs, investors large and small can see their dividend reinvestment plan create a self-perpetuating growth cycle within their brokerage account. It should be noted here that ‘growth’ in this context refers to the number of shares, not the dollar value of the position.


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Get a FREE stock when you open an account with this referral.

Open Robinhood Account


Robinhood Alternative


For DRIPs as well as for services that Robinhood does not offer, such as IRA accounts, advanced trading tools, mutual funds, and bonds investing you can use another $0-commission broker - TD Ameritrade.


Open TD Ameritrade Account


$0 commissions + transfer fee reimbursement.

Open TD Ameritrade Account


TD Ameritrade Review


TD Ameritrade rating

Read detailed review of TD Ameritrade »

Updated on 3/21/2022.


About the Author
Chad Morris is a financial writer with more than 20 years experience as both an English teacher and an avid trader. When he isn’t writing expert content for Brokerage-Review.com, Chad can usually be found managing his portfolio or building a new home computer.